Asian stocks slipped further on Friday as China posted its weakest economic growth since the global financial crisis, adding to market concerns about trade disputes, rising US interest rates and Italy’s free-spending budget.
The MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.2 per cent weaker following China’s latest GDP reading. Australian shares fell 0.3 per cent and Japan’s Nikkei average was 1.1 per cent lower.
A weak Wall Street on Thursday set the tone for Asian trade. The Dow Jones Industrial Average fell 1.27 per cent, the S&P 500 lost 1.44 per cent and the Nasdaq Composite dropped 2.06 per cent.
“Markets continue to digest the combination of higher U.S. rates, ongoing trade tension and Chinese growth concerns,” analysts at ANZ said in a note.
On Thursday, the flight to safe-haven assets partly dampened rising US Treasury yields. Still, early in Asia on Friday, the 10-year yield rose to 3.1767 per cent from the US close on Thursday of 3.175 per cent.
The two-year yield, sensitive to expectations of higher Fed fund rates, edged up to 2.8741 per cent.
China’s economic growth in the third quarter slowed to 6.5 per cent, its weakest pace since 2009 and below expectations, as a campaign to tackle debt risks and the trade war with the United States weighed on the economy.
“Weakness is largely coming from the secondary industry- most notably manufacturing,” said Betty Wang, senior China economist at ANZ. “We may review our Q4 forecasts. Property investment continues to hold up which may provide some support.”
Shares in China, which initially extended losses after the figures were released, rallied as investors digested statements from senior regulators pledging support for private firms and companies facing liquidity problems.
The benchmark Shanghai Composite index was 0.5 per cent higher at around 0300 GMT, after hitting near four-year lows on Thursday, in part hurt by widespread concern that plunging share prices could lead to a spike in margin calls.
Analysts cautioned that China’s economy would continue to face difficulties.
“Looking ahead, economic outlook is not optimistic with exports facing further headwinds as U.S. tariffs kick in and demand from emerging countries ebbs,” said Nie Wen, an analyst at Hwabao Trust in Shanghai.
China’s premier said this week that the economy faces increased downward pressure, but that government will take measures to stabilise growth.
In the latest trade war volley, the US is requesting that a World Trade Organization dispute resolution panel look into tariffs imposed by China, the European Union, Canada and Mexico in retaliation to US tariffs on steel and aluminium.
Further fraying market nerves, the European Commission on Thursday said a draft 2019 budget from Italy was in “particularly serious non-compliance” with EU rules, setting the stage for a possible unprecedented rejection of the country’s fiscal plan.
The euro was up 0.06 per cent at $1.1459, having lost 1.3 per cent in a month, while the dollar index, which tracks the greenback against a basket of six major rivals, was a touch higher at 95.943.
The dollar was up 0.18 per cent against the yen at 112.38, according to Reuters news agency.
Oil prices ticked higher after falling on Thursday. US crude was up 0.3 per cent at $68.88 a barrel and Brent crude was trading at $79.47 per barrel, 0.2 per cent higher.
Gold also rose, with spot gold rising 0.2 per cent to$1,227.94 per ounce.